Gold and GDXJ analysis (Dec. 2019)

Gold Spot and GDXJ Analysis

This is my first blog article for my eTorian Copiers and Followers.
I wanted to share my view and technical analysis on Gold and GDXJ.
Most of the pictures and prices where generated using the eToro platform as the main source.

My discipline tries to put together technical and fundamental analysis to produce a view of where the market prices might go in the near future.

Gold Spot Analysis

As you can see from Figure 1 of the gold spot prices, the Gold has been consolidating inside a multi-year triangle that recently was finally broken to the upside. Around mid-June of this year the prices of the gold broke through the Resistance 1 (on violet) slightly below 1350$ and went all the way through the Support 1. It continued to grow until it hit a new major resistance point (Resistance 2).
Then it began to consolidate for the rest of the 2019.
If we check the RSI indicator, we can observe that on the weekly chart the values have been trending lower after the major break through, typical of a consolidation phase.
The RSI is now approaching for the third time the upper limit of the descending trend. If it breaks out, it could represent an early warning that the end of the consolidation phase is near and the gold is ready to begin to move higher and most likely to break the Resistance 2 level, toward the next long term resistance level which could be 1750$.
If it fails to break though the RSI negative trend, it might take another round of several months of consolidation. A big role will be played from the strength of the dollar index (which many expert predict will weaken for next several years) and the central banks with particular focus on the FED.

Figure 1

That the time the gold is getting ready to break out is approaching could be better appreciated in the next picture that takes a closer look to the gold spot daily chat (Figure 2).

Figure 2

In the picture we can observe that the Gold prices already broke through the RSI descending trend-line and it is approaching the upper limit of the triangle inside which was trading since August. If it will able to break thought the Breakout 1 resistance levels, it might propel up to the Breakout 2 resistance.
Due to the relatively high levels of RSI and the record high longs very close to 300K contracts net long among major speculators (Figure 3), I doubt that in the short time the gold prices will have sufficient propulsion to break above 1550$.
I would expect that it will bounds off it and will begin a new period of consolidation between 1400$ and 1550$, too much optimism in the short time can be seen as a contrarian signal that must be worked out and absorbed before the next big move arrives.

Figure 3

  GDXJ Analysis

This is the asset that I personally will use in my trading to take advantage of the positive outlook for the Gold prices. It's possible to buy shares of this volatile ETF which normally trades in accordance with the Gold prices or price expectation but with larger moves, it pays no daily commissions and distribute ok dividends.
As you can see in Figure 4, also the GDXJ ETF has been trading for years inside a large triangle and printed a temporary low in the second half of 2018.

Figure 4

During the second half of the 2019, following the move of the Gold prices moved through the resistance slightly above the level 35$. It then began to consolidate between this level which began a support level and the next resistance level around 43$ but perhaps due to the anticipation for a move higher for the Gold, the GDXJ has already broken trough the RSI negative trend-line even in the weekly chart.
If during the next year will be able to break through the level of 43$, the next target could be above 50$.
I find this type of asset a good protection for my stocks portfolio, for this reason I increased to above 13% the exposure to this asset and I plan to trade it rather aggressively during the consolidation period that will follow.



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The graphs and prices shown in this analysis were taken using as a source www.etoro.com, the platform I am using for my trading as DanieleTrader.
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Disclaimer

The content published in this blog represents my personal view.

It is intended for information and educational purposes only and should not be considered investment advice or an investment recommendation.